Despite the challenging economic and political environment in Italy during Q118, Centrale del Latte Di Italia SpA (MI:CLII) price increases, implemented mostly during Q217, continued to drive revenue growth. We should see the effect of this subside during Q218 as we start to cycle a full year of price increases. Vegetable-based drinks and the export business continued to witness excellent growth, albeit from a low base. At this early stage, we leave our FY18 forecasts unchanged, and our fair value remains at €3.30 per share.
Price increases still driving revenue growth
Price increases were implemented on 1 April 2017 to offset some cost inflation and were fully rolled out on 1 June 2017, so we should see the effects of these subside during Q218 as we lap the price increases. Q118 organic growth continued to be impressive at 5.1%, with EBITDA margin of 3.8%. Raw materials remain a challenge, with liquid milk prices now softening somewhat, but butter and cream prices are still rising. For FY18, we forecast 0.5% revenue growth and EBITDA margins up 30bp to 4.2% – unchanged from our previous estimates.
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